Why Do Gambling Operators Run Multiple Brands?
Abstract
Gambling operators run multiple brands as a push for diversification, risk management, and market segmentation purposes. This strategy allows operators to cater to different segments of the market, diversify risk, gain a competitive advantage, and retain customers. The trend towards multiple brands under single operators, mega mergers and acquisitions, and the evolution towards conglomerates indicate the industry's resilience and adaptability.
Introduction
The gambling industry is a dynamic and rapidly evolving sector. Operators frequently run multiple brands to address various business needs and market challenges. This strategy not only helps in market segmentation but also in managing risks and leveraging competitive advantages. This paper explores the rationale behind gambling operators managing multiple brands, supported by literature and industry examples.
Background on Multiple Brands Operating Under a Single Operator
Market Segmentation
Market segmentation allows gambling operators to target different segments of the market effectively. Different brands can cater to high-stakes gamblers, casual players, or niche markets such as sports betting enthusiasts or bingo players. For example, Flutter Entertainment owns brands like Paddy Power and Betfair, each targeting different market segments.
Brand Diversification and Risk Management
Brand diversification helps in mitigating risks. If one brand faces reputational issues, the other brands remain unaffected, ensuring continuous revenue generation. This strategy is evident in companies like GVC Holdings (now Entain), which manages brands like Ladbrokes and Coral, thereby isolating reputational risks and maintaining market stability.
Competitive Advantage
Operating multiple brands allows a company to occupy more market space, making it harder for competitors to gain market share. It enhances brand presence and customer reach. For instance, Betsson Group operates various brands, each with a unique market strategy, ensuring comprehensive market coverage.
Customer Retention
Multiple brands under one operator help in retaining customers. If a customer is dissatisfied with one brand, they might switch to another brand within the same company rather than opting for a competitor. This approach enhances customer loyalty and retention.
Regulatory Reasons
In some jurisdictions, regulatory constraints limit the number of licenses a single brand can hold. Multiple brands allow operators to navigate these regulatory challenges effectively, ensuring broader market participation.
Mega Mergers and Acquisitions in the Gambling Sector
The gambling industry has witnessed significant mergers and acquisitions, driven by the need for economies of scale and market expansion. Notable deals include the merger between Ladbrokes and Gala Coral, Betfair and Paddy Power, and GVC's acquisition of Bwin.party. These mergers enable operators to consolidate resources, reduce costs, and expand their market presence.
Evolution of the Gambling Industry Towards Conglomerates
The gambling industry has evolved from small-scale gaming sites to a global industry dominated by conglomerates. This evolution has been accelerated by technological advancements and market expansion. Conglomerates like Flutter Entertainment and Entain operate multiple brands, leveraging their diverse portfolios to dominate the market.
Recent Industry Shifts and Market Expansion
The lifting of the federal ban on sports betting in the US in 2018 has led to significant market expansion. This ruling has opened up new opportunities for operators, providing a boost to state economies. The sports betting industry has experienced rapid growth, with more operators entering the market and offering diverse betting options.
Strategic Advantages of a Multi-Brand Approach
Market Domination and Brand Awareness
Operating multiple brands allows gambling operators to cover a broader range of market segments, enhancing their overall market presence. This strategy is evident in companies like Kindred Group, which operates brands like 32Red and Unibet, each targeting specific customer groups.
Catering to Diverse Consumer Preferences
Different brands can cater to varying consumer tastes and preferences, allowing operators to target specific market segments. This approach is beneficial for operators like Betsson Group, which offers tailored experiences for different customer groups, from casual players to high rollers.
Risk Distribution and Reputation Management
A multi-brand strategy helps isolate the reputations of different brands, thereby diversifying risk. For example, if one brand faces a reputational issue, it is less likely to impact the operator's other brands. This approach allows operators to experiment with different market strategies, learning from successes and failures in a controlled environment.
Economic and Business Rationales
Acquisition and Integration of Competitors
Gambling operators often acquire competitors and retain their distinct brands to consolidate market share and expand their reach. For example, Evolution Gaming's acquisition of NetEnt allowed them to maintain NetEnt's strong brand identity while integrating its technological capabilities and customer base into their broader strategy.
Financial Synergies and Resource Allocation
Managing multiple brands can offer economic benefits such as cost savings through shared resources and increased revenue streams. However, it also presents challenges like the need for distinct marketing strategies and operational structures for each brand. An instance of this is Betsson Group, which operates multiple brands and benefits from shared technology and centralized services while maintaining unique marketing for each brand.
Shift to Digital Platforms
The transition to online gambling has forced operators to adapt their brand strategies. Traditional operators with multiple brands, such as 888 and William Hill, are now emphasizing their online offerings to stay competitive in a market that increasingly favors digital platforms.
Competition with Digital-Only Brands
For multi-brand operators, competing in the digital space, particularly against digital-only brands, requires a fine balance. These operators need to leverage advanced technologies like artificial intelligence and data analytics to understand customer behavior and preferences, tailoring their offerings accordingly. Additionally, integrating innovative features such as live betting and mobile-first platforms can be crucial in staying competitive in an increasingly digital gambling landscape.
Brands under the umbrella of companies like GVC Holdings have to differentiate themselves from each other and digital-native brands that may have a more agile approach to online gambling.
Conclusion
The strategy of operating multiple brands allows gambling operators to effectively segment the market, manage risks, and gain competitive advantages. This approach is evident in the evolution of the gambling industry towards conglomerates, the trend of mega mergers and acquisitions, and the recent market expansion driven by regulatory changes. By catering to diverse consumer preferences and leveraging financial synergies, operators can enhance their market presence and ensure business resilience. The shift to digital platforms and the need to compete with digital-only brands further underscore the importance of a multi-brand strategy in the modern gambling industry.